As a business person, it is important to have a clear understanding of the available strategies that would create more value for your business. By doing so, you avoid the danger of limiting yourself to familiar territories. There will be times when you simply need to create synergistic forces with companies whose vision is similar to yours. This is when mergers and acquisitions come into play.
An examination of the benefits of such a strategic move is a good place to start to set you on the right course. The following post gives a detailed overview of the importance of mergers and acquisitions:
Why do companies merge with or acquire other companies?
A:Some of the reasons for mergers and acquisitions (M&A) include:
- Synergy: The most used word in M&A is synergy, which is the idea that by combining business activities, performance will increase and costs will decrease. Essentially, a business will attempt to merge with another business that has complementary strengths and weaknesses.
2. Diversification / Sharpening Business Focus: These two conflicting goals have been used to describe thousands of M&A transactions. A company that merges to diversify may acquire another company in a seemingly unrelated industry in order to reduce the impact of a particular industry’s performance on its profitability. Companies seeking to sharpen focus often merge with companies that have deeper market penetration in a key area of operations. Read more at Investopedia…
Perhaps the most important need that mergers and acquisitions address is the need to survive in a highly competitive business world. This is one of the key strategies you can use to ensure your business thrives, regardless of the existing economic dynamics.
An outline of the benefits of mergers will better help you understand this particular option. The following post describes how mergers benefit the public as well:
Benefits of Mergers
A merger occurs when two firms join together to form one. The new firm will have an increased market share, which helps the firm gain economies of scale and become more profitable. The merger will also reduce competition and could lead to higher prices for consumers.
The main benefit of mergers to the public are:
- Economies of scale. This occurs when a larger firm with increased output can reduce average costs. Lower average costs enable lower prices for consumers.
Different economies of scale include:
- Technical economies; if the firm has significant fixed costs then the new larger firm would have lower average costs,
Bulk buying – A bigger firm can get a discount for buying large quantities of raw materials. Read more at Economics Help…
There are so many benefits of mergers done the right way. It could just be the next best thing for your business in terms of attracting new customers.
If you are still skeptical about mergers and acquisitions, the following success story will prove to you that the strategy works:
Corporate to Consultant: Nicole Valentine Uses Mergers and Acquisitions to Dominate in Small Business
Nicole Valentine has been in business even before she could get a learner’s permit. Her first role in a sustainable business was ringing the register at her grandmother’s tailoring business. There she learned not only how to sew but the fundamentals of customer service—greeting customers, helping them get the perfect fit, and even accounts receivable— collecting IOUs from fashionistas on the New York social scene.
From there, Valentine set out on a three-year stint in her parent’s childcare business, managing the after-school and summer programs. Business, fundamentally, is in her blood. Not being able to escape her bloodline, she used those building blocks for the mental stamina to become an M&A and corporate securities lawyer in New York. Read more at Black Enterprise…
Valentine’s story is a description of how far you can go with sound mergers and acquisitions. In short, the sky’s the limit.
If you are considering merging with or acquiring another business and need legal assistance, attorney Jonathan Meek with Meek Law Firm is here for you. Call him at (704) 848-6335 or use the contact form on the website to schedule a consultation appointment.